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126 Informatization of the China Economy

A five-year plan on China’s national informatization (2016-2020) was issued by the State Council on Dec 27 (1). This calls for integrated national databases, covering information from government, academic institutions and other public sectors, will be set up and open to the public, so as to break information barriers.Informatization call for a unified online system will be established, integrating information and services from different departments, regions and levels to build a “smart government”. The government hopes to deal with 80 percent of paperwork online by 2020.

The government hopes to connect the internet industry with manufacturing and agriculture. E-commerce and other new business models will be promoted. By 2020, e-commerce trade volume is planned to reach at least 38 trillion yuan.

The plan also focused on cyber security, promoting legislation of relative laws and regulations, setting up risk alerts and an emergency mechanism. It also vows to further crack down on telecom fraud.

Blockchain technology saw its first official mention in China in 2016, when it was written into the 13th Five-Year Plan, a road map for China’s development in the five years from 2016 to 2020. Blockchain was depicted as one of the major tasks and projects for the nation, along with quantum communication, AI, and autonomous driving. Meanwhile, the Plan calls for large scale experimentation which will test the feasibility of the proposed directions.

A Tencent Experiment (2)

WeChat, a messaging, social media and financial services app owned by Tencent Holdings, has deployed a blockchain electronic invoice system, making the city of Shenzhen the first in China to issue invoices with blockchain technology.

The blockchain invoice process, which encompasses payment, invoicing and reimbursement, was created in partnership with Shenzhen Taxation Bureau and Kingdee Software.

This system was developed to simplify the process of reimbursing company employee expenses. Previous paper and electronic invoicing processes led to a cumbersome and elongated process of invoice verification, submission, review, and tax returns filing before eventually settling with employees.

How Blockchain Experiment Works

With this blockchain invoice system, the process is substantially shortened, removing all intermediary actions between invoicing and reimbursement. Any payment made through the WeChat self-checkout is thus effectively a one-click reimbursement process.

For example, an employee of a company after having a company dinner can make payment via the WeChat mobile payment platform using their iPhone. The data from that transaction is the “invoice” and the information from this invoice is synchronized to the financial system of employee’s company and the tax bureau in real time.

This way, information is not tampered with or lost, thereby simplifying the process for all parties involved in the transaction namely the merchant, the employer, tax authorities, and the employee.

Merchants get to save on time and personnel since the invoices are issued automatically at checkout, rather than manual invoice issue and entry of relevant details of the employee’s company for tax purposes. The employee’s company on its part can easily verify invoice by simply logging into its financial system.

The tax regulator can then monitor the entire process of invoicing, circulation and reimbursement in real time, ensuring full and timely tax collection, while the employee can claim reimbursements online. Accordingly, “...at the digital invoice based on blockchain technology has features such as complete traceability of the whole process and non-disruptive information, which consistent with invoice logic, can effectively avoid false invoices, and improve the invoice supervision process.”

At present, a number of merchants are the first to access and utilize the blockchain electronic invoicing system. Meanwhile Tencent is developing its own blockchain platform called MySQL, a solution designed to provide an enterprise class blockchain infrastructure to support reliable blockchain cloud services.

Summary:The adoption of blockchain technologies for integration of the China economy has now been identified as one of the parts of the 13th Five-Year Plan, which is the road map for China’s development from 2016 to 2020. The progress made in the implementation of blockchain will be closely tracked in the blogs that will follow.